Monitor Vol 39 08_Final_Nov08.pdf - tips

Industrial Policy
42
Trade & Industry Monitor
the department of economic development and tourism of the provincial
government and other stakeholders with an interest and knowledge of
the sector. These SPVs function effectively as sector development organisations.
The objective is not merely to develop existing firms, but critically
to also enhance opportunities for new entrants – notably small firms and
particularly black and female owned and managed firms.
The provincial government supports SPVs that are broadly representative
and that have considerable legitimacy within the sector. Ideally, membership
of the SPV should be diverse and include small firms. Government
can have some confidence that policy proposals that emanate from such
associations are likely to have broad legitimacy within the sector. The task
of government is to support those proposals that will develop the sector
in a manner that accords with governmental objectives of both growth
and equity.
The principal role of the SPVs is to institutionalise the exchange of information
between the private sector and government. The SPVs allow for
government to obtain information as to firms’ future investments and the
factors that are promoting and restraining investment activity. They are
the institutional mechanism through which potential policies to support
the sector are discussed and debated and ultimately presented to the
provincial government for assistance.
Moreover, the role of the SPVs is not confined to discussing policy proposals.
SPVs may well engage directly in implementation. The provincial
government may grant funding support for a proposal that emanates from
an SPV and task that organisation with ensuring that the programme is
carried out and that the funding is spent effectively. Governmental capacities
are not solely limited in terms of policy formulation. Arguably, an
even more critical constraint lies in government’s capacity to implement.
SPVs, or other institutional forms of sector organisation, “… can carry
much of the burden of industrial policy – both in its design and in its
implementation, thus economising on limited governmental capacities.”
(Kaplan, 2006).
As regards funding, the MEDS favours a co-funding mechanism. Since
many of the market failures are partial rather than total, some of the funding
support can and should come from the beneficiaries themselves. Thus,
in regard to training for example, since firms will gain at least some of the
benefits of training expenditures, government support for training programmes
can be partial. This limits the deployment of government fiscal
resources. At the same time, this gives government a significant measure
of security that public monies are being spent in projects to which the intended
beneficiaries, who possess far more information than government
as to their real development needs, are prepared to commit their own
resources (Western Cape Government, Department of Economic Development
and Tourism, 2005: 136).
The institutional design proposed here is certainly not free of risk. The
capacities required of government are still far from trivial. The danger
of governmental capture, always real, may be enhanced where a close
relationship is cultivated with business associations and where, in addition,
government capacities are weak. But, however this is structured
institutionally, in the present context in South Africa, the design and development
of effective industrial policy will necessitate a major role for
business.
Institutional arrangements will necessarily evolve and change over time.
It is of critical importance that the institutional design of industrial policy
embodies feedback mechanisms and structured monitoring and evaluation,
something that has been largely lacking from previous policies. This
will enable governmental capacities to grow with experience - a version of
learning by doing (Western Cape Government, Department of Economic
Development, 2005: Chapter 6). As its own capacities enhance and develop,
government will then be in a position to be more effective and also
more adventurous in advancing its industrial policies.
References
Alves, P. and Kaplan. D. (2004) South Africa’s Declining Export Shares: The
Developing Country Challenge Trade and Industry Monitor (June) vol. 30
pps. 2-6.
Accelerated and Shared Growth Initiative South Africa (ASGISA) (2006)
Background Document. Media Briefing by the Deputy President Pumzile
Mlambo- Ngcuka. A Summary. (February 6)
Chang, H. J. (1996) The Political Economy of Industrial Policy Macmillan,
London.
Department of Economic Development, Western Cape (2005). Micro-economic
Development Strategy for the Western Cape. Synthesis Report. Version
1. July. Department of Economic Development, Western Cape.
Department of Trade and Industry (the dti) (2002) Accelerating Growth
and Development. The Contribution of the Integrated Manufacturing
Strategy. DTI, Pretoria.